Feb. 6: GE’s Board provides dividend update
On Friday February 6, 2009, GE’s Board of Directors authorized a regular quarterly dividend of $0.31 per outstanding share of the company’s common stock. The Board also said it will continue to evaluate the company’s dividend level for the second half of 2009 in light of the growing uncertainty in the economy, including U.S. government actions, rising unemployment and the recent announcements by the rating agencies. See full press release.
GE Theater’s lost Zsa Zsa hit
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With the market turmoil omitting the dividend would probably be the best use of cash for the rest of the year. When things rebound and markets are better then the dividend can be reinstated.
This is preferable to further equity sales which would dilute shareholder value.
In the mean time I collect more than enough with my call premiums to make up for any dividend omission. By march I would have collected the equivalent of 1 years of dividends for FY2009.
Tough decisions to be made, no doubt about it. On one hand you have folks that have stuck with GE as shareholders for a long time and who are living on fixed incomes and dividends from the likes of GE. On the other hand you have unemployment in all areas of the economy and a 10%+ dividend that simply isn’t feasible (generally) in any environment; it’s simply not a realistic percentage given the environment we are in.
The biggest point that should not be lost on GE shareholders is the fact that GE employees are losing their jobs based on business necessity! Sure, for shareholders it’s painful to see our dividend get cut and our equity get pushed down on paper. However, as a shareholder, I would be disgusted with myself if I "demanded" a dividend at a time when there are people that helped to create those dividends going home at night worried about their jobs or, worst of all, having to tell their families that they have indeed lost their jobs. I have children and I know what type of pain and fear I would have in that situation. In fact, if my dividend could contribute to saving talent within GE’s ranks for the company’s future benefit, then by all means cut it entirely and keep those jobs.
When I see thousands of GE employees being let go, the last thing I’m concerned with is a dividend. All I want is clear and concise communication from Mr. Immelt and the rest of management (regardless of what tough calls must be made).
GE shareholder equity and dividend can/will rebound when GE and the economy rebounds; but there are real lives being impacted drastically right now while I see a lot of people complaining about the dividend. I want a clear answer without reiteration on it, but I would much prefer they slowdown the "brain drain" of talented folks and cut the dividend completely to do it.
For the record, I do not work for GE and I never have. I’m simply a shareholder in what I perceive to be a great company. So, my thoughts on GE workers are genuine. There’s a lot of talent that’s unfortunately having to be let go and it really does disgust me when I hear people complain about not getting a 10%, 5%, or 3% dividend.
Give me a dividend when GE employees are no longer fearful of their jobs being lost and the company is back on solid footing throughout. Until then, I’m willing to wait it out. That dividend money can be put to much better use.
Instead of dividends, stop paying them and buy back the stock at 12.
You should be able to get it down to like 7billion outstanding
Yes, i also think the best is suspending the dividend and doing a buyback as soon as there are signs of market improving, do not dilute the shareholders value by issuing equity.
We can buyback the last issue at half the value today.
I’d love a buyback too; but, I’d like to see the "brain drain" stop first.
At this point, it is an integrity issue. GE said they would maintain the dividend through 2009. We talk about "Say Do Ratio" – if we say we’re going to do it, we need to do it. Period. Even if what we committed to may not be as beneficial as we once thought. That’s what integrity IS, after all – not keeping your word when it is easy – keeping your word when it gets tough to do so!! And yes, people probably DID buy and/or hold shares based on this promise made by GE.
And . . . . anyone besides me thing we should consider buying Genworth back? It sure is cheap these days
A lot of people who retired from GE are counting on the dividend payment to maintain their current standard of living. I believe the elimination of the dividend even for a short period of time could pose a financial hardship for many and could require them to sell stock at the current prices which would be unfortunate.
Under normal circumstances, I would commend management for retaining the common stock dividend. However, given the severe drop in economic activity and uncertainty surrounding the future, I encourage you to reverse policy and cut the dividend, say by 40-50% and indicate that one year in the future, consideration would be given to offering a special dividend up to the level of the dividend cut, based on company performance and future prospects. Investors at this point in the cycle will recognize the value in being conservative. Its quite possible that the stock price will re-bound because of the dividend cut!
Full disclosure: I have been following our common stock for the last three years and recently purchased some at $12 (I am a conservative value investor).
A big buyback at current prices would definitely be a positive for the future. I never understood why companies buy back equity when it is expensive only to dump it when its cheap (buy high sell low)
It would make more sense to suspend the dividend and instead buy back stock. This would mean more shareholder equity and less dividend payout overall due to less outstanding float.
I fail to understand why GE would even consider a dividend reduction in place of a reduced financial credit rating. They are already paying Warren Buffet far in excess of what a triple A rating should pay for funds and a downgrade has already been factored into fund rates.
Hundreds and possibly thousands of businesses pay substantial dividends to their stock holders even though they do not hold a triple A rating. Immelt seems to have little regard for GE stock holders and is becoming a total failure in many of GE’s highly noted success areas. I am on a fixed income and depend highly on my dividends. I sincerely hope the Board of Directors soon realize he is not the caliber, or of the integrity, of a person needed in that responsible position. Jack Welch threatened to fire him at one time, too bad Jack’s still not there, and the company would not be in the mess it now is. I hope the dividend reduction will be seriously reconsidered in view of past dividend history with the company, and the severe investor relations it will cause over the long range.
Thank you sincerely for your consideration,
My husband is one of those GE workers in fear of losing his job. Everyday we wonder if he will be told he is getting laid off. All around him are other employees living with the same fear. This fear extends of course to their families and all of our lives are on hold just praying they keep their jobs. I really appreciate the people who are willing to take a cut with their dividends. Let’s pray for a speedy recovery to the economy so we can all breathe a big sigh of relief.
I understand frustrations are high, but to label Mr. Immelt a failure (after one of the worst environments the company has ever seen) is pushing it and unjustified in my opinion.
10 year track record of GE the company:
Revenues (in millions):
1999 – 111,630
2000 – 129,853
2001 – 125,913 (Mr. Immelt takes over)
2002 – 131,698
2003 – 134,187
2004 – 152,363
2005 – 149,702
2006 – 163,391
2007 – 172,738
2008 – 182,515 (even with the environment it faced)
Net income:
1999 – 10,717
2000 – 12,735
2001 – 14,128 (Mr. Immelt takes over)
2002 – 15,133
2003 – 15,589
2004 – 16,593
2005 – 18,275
2006 – 20,666
2007 – 22,468
2008 – 18,089 (still made a profit in a serious economic collapse in the market as a whole)
ROE:
1999 – 26.3
2000 – 27.4
2001 – 26.8 (Mr. Immelt takes over)
2002 – 25.5
2003 – 21.8
2004 – 17.5
2005 – 16.6
2006 – 18.6
2007 – 19.7
2008 – 16.4
Pretty good and consistent ROE (especially when you consider all that GE has to manage)
Dividends:
1999 – 0.49
2000 – 0.57
2001 – 0.66 (Mr. Immelt takes over)
2002 – 0.73
2003 – 0.77
2004 – 0.82
2005 – 0.91
2006 – 1.03
2007 – 1.15
2008 – 0.93 (still paid a dividend in one of, if not the, worst years in GE’s history due to the environment)
What I think people are upset with, equity price in the market (which Mr. Immelt doesn’t set) — using high prices for each year as reference point as well as P/Es at the time for a measuring stick:
1999 – $53.17 P/E 50 (at or near tech bubble high)
2000 – $60.50 P/E 48 (at or near tech bubble high)
2001 – $53.55 P/E 38 (unwinding of market begins; Mr. Immelt takes over)
2002 – $41.84 P/E 28 (still too high of a P/E)
2003 – $32.42 P/E 21 (still too high of a P/E)
2004 – $37.75 P/E 24 (still too high of a P/E)
2005 – $37.34 P/E 22 (still too high of a P/E)
2006 – $38.49 P/E 19 (P/E more reasonable)
2007 – $42.15 P/E 19 (P/E more reasonable)
2008 – $38.52 P/E 20 (E in P/E can’t be measured do to unruly market conditions; not a good indicator of pricing at this time)
I think if people take a realistic look at the numbers, Mr. Immelt has actually done a good job of leading this company. It’s not Mr. Immelt’s fault that the market overvalued the stocks in the late 90s and through the early part of this century; the market did that and the market dropped it back to within reason.
Look where Mr. Immelt has positioned this company for the future. In every areas that GE does business, they will see profits going forward because the world needs what GE provides (and that need will pick up strength again as this economic fiasco subsides). U.S., China, India, Brazil, former parts of the Soviet Union, the Middle East — they are/were/will all expanding in the way of infrastructure/energy, medical, rail, airlines, and they will need financing for all of it. What has Mr. Immelt built this company to do over the last decade, serve those areas and serve them well.
People can bash Mr. Immelt and this management team all they want, but the facts simply don’t represent reality. You’re mad because the stock price is down and dividends might need readjusting for legitimate business reasons and I get that. However, hold on, and GE will make its shareholders happy going forward.
Due to unruly market conditions, not "do". Sorry about that and/or any other grammatical errors.
To add, if those numbers are off a bit, please feel free to let me know because I certainly could have made a mistake here or there. However, anyone that’s good at valuations (Mr. Buffett perhaps) will look at those numbers and see they are pretty strong. Only concern would be the debt, and GE is/has taken drastic steps to minimize that risk (which Mr. Immelt has obviously led the charge on).
Hi Carol,
I’m 100% sincere when I say that if cutting my dividend for however long it takes could save your husband’s job, then I ask Mr. Immelt right now to cut it (but, I understand I’m not the only one he needs to think about when he factors everything into his decision making process).
Good luck to you and your husband.
Oops:
Instead of "facts simply don’t represent reality" it should read, "the criticism simply doesn’t represent reality."
My mind works faster than my fingers:(
I guess I’d be a hypocrite if I didn’t do this today:
BUY 75 GE $11.5098 $870.24 XMA5########### CASH 2/12/2009 3:40:39 PM
2/18/2009
Chris.
In the simplest of terms "YOUR AS GOOD AS YOUR LAST MISTAKE", GE AT THE MOMENT IS SELLING 7 x EARNINGS even worse the projected EPS is 9 at this price point, deplorable number at best. What the investment community is saying GE at the moment, an illusion of fact and reality . More blunt regardless of any Immelt statement he MUST reestablish his lost credibility to regain the trust of WALL STREET
In Mr. Immelts defence the street is more unsure of their own credibility and who do they think they are dictating to business on how to manage. Further, the decision not to give forward guidance, in my opinion is core to why GE is at a multi year low. (15 year)
Any reduction in dividends could cause the institution holders to liquidate their holding, such as the Fidelity funds… current they hold more than 50% of GE open shares.
Keith and John made updates presentation to industries on Feb 10th, 2009. The charts provided market with more clarified going forward actions, business drivers, initiatives, strategies to support the long-term path…the highlight, the Technology Infra. and Energy Infrastructure, the revenue per employee are much higher than its industrial peers…just like everyone else in the world, they are working hard to get out of the slump…
It wasn’t a GE mistake that the market around GE deteriorated more rapidly than anyone predicted, the fact that Bear Sterns blew up right before GE announced in the first quarter and tanked the credit markets (thereby making analysis before then hard to accurately meet), nor was it a GE mistake that fund managers that took risks that they didn’t know how to properly manage had to liquidate everything they had to include GE stock.
The most recent facts are that GE has been pulling in billions of dollars in business deals (and that doesn’t include what GE may get from the stimulus packages being drawn up around the world). It is also a fact that GE pulled in $180 billion in revenues, $18 billion net, and paid a dividend in 2008 (when other firms had to make drastic cuts). It is a fact they just brought GE Capital to 6:1 thereby showing how the full business model of GE can be put to good use.
Biggest miscue in my mind was the potential two-step on the dividend. However, at this time, the dividend is being paid and they haven’t cut it yet. I’ll let others speculate on whether it will be cut.
All in all, given the hand GE was given this past year, I think people would be very hard pressed to say they could have led the business any better than this management group has done. I believe measuring results over a decade is a prudent thing to do when you are an investor. The fact is, GE has continued on an upward rate of prosperity (as a business) under Mr. Immelt’s tenure.
Case in point, GE recently said this, " We earned about $10 billion in the ‘70s, $25 billion in the ‘80s, $65 billion in the ‘90s, and expect to earn about $170 billion this decade." Now, I respect Jack Welch; but for those who say GE has declined as a business under Mr. Immelt are just flat wrong. If you add up all of the years Mr. Welch was in charge of this company and compare it to the decade that Mr. Immelt has been in charge, I think you might be surprised by the facts.
So the market is pricing the stock (not the company, but the stock) at an extremely low level. And you have the likes of Moody’s threatening to take away AAA (who they themselves had a bad "business" year last year and who have a credibility issue themselves based on their ratings of the housing derivatives all these years). I stand by my statement that the biggest thing people are upset with is the unwinding of the stock price from absolutely ridiculous levels over the last decade. Then, right at the end of that unwinding, we have this economic tsunami. However, once again, GE is still bringing in revenues and turning a profit in the midst of all of it.
If people want to dump their shares at 7 times "earnings" then I will be glad to take as many of those shares off their hands as I can afford.
"Any reduction in dividends could cause the institution holders to liquidate their holding, such as the Fidelity funds… current they hold more than 50% of GE open shares."
I would like to see facts to backup that claim; it sounds very speculative. GE makes money and fund managers need to invest in companies that make money. No way will fund managers dodge owning GE shares over the long haul if GE is set to make money from its current service contracts, its backlog of business, the business it’s acquiring now, and any/all benefits from stimulus packages. In fact, there are fund managers that own GE that have publicly stated that they thought it might be in GE’s best interest to cut the dividend.
I am a GE shareholder.
I have mixed emotions.
On the one hand, the company made a commitment to paying a 1.24 dividend in 2009. Many people, myself included, are buying and holding the stock BASED on that commitment.
I absolutely LOVE the stock price at these depressed price levels. Haven’t really added to my position in years, which wasn’t that large to begin with, and was a net seller between 2005-07, so I have been buying back my shares anytime I get my hands on some free money. In fact, I plan on adding to my position Monday morning. Thus, I love the fact that I can buyback stock at 11-12, for what I sold at 35-40 a few years ago. Reinvesting the dividend, at these price levels, will only amplify my long term return.
You have to go all the way back to the 1979-1982 period to find GE trading at less than 1.3 times book value Over the next 18 years, a 30k investment turned into over 1 million. Thus, if history is ANY guide, this stock is not just cheap, it’s dirt cheap.
On the other hand, I don’t really NEED the money, as I am in the fortunate position to re-invest my dividends, so if a 30-50% cut would help some people keep their jobs, stay in their homes, and feed their children, then by all means, this is something that should be strongly considered. We should all want to own businesses that error on the side of doing the greatest good.
Right now, many people are scared. Times are unbelievably tough. I get that. Thus, I’m willing to do my part. These are the time periods when the shares are being returned to the rightful shareholders anyway.
David
We are retried GE people and rely on the dividends to supplement our fixed income……………
I have enjoyed reading the recent comments about GE.
Things seem to be just a little different today than a year ago.
I understand the concern of a shareholder, the possible loss or reduction in the dividend and also the loss of a job for a GE employee or anyone. (I am there. With job loss, and at my age of 57, without the comfort of a pension, find myself thinking about the next turn, the next corner in my life).
The current situation in the economy is unprecedented.
Unless compared with the past great depression. Things have changed a great deal since then and we should take
comfort with that. But getting on to the point of my
thoughts about GE.
GE is a stalwart in our economy. Diversified in so many ways, which should allow GE to weather the current
storm.
Jeff Immelt and the company are doing, I think, the
the best any one could, to adjust daily, to the changing circumstances.
Sometimes, to make statements about dividends and try
to guarantee them for any period may be the best of intention, but possibly ill conceived.
Just consider the same, with regard to Dow Chemical.
Good intentions, but things just did not seem to work out as they might have planned or expected.
You may want to give GE management a little latitude for their thoughts and statements on this issue.
A responsible company, it’s CEO and Board of Directors
are charged with the responsibility to make decisions
to insure the health and viability of the company
going forward, concerning the current and/or future business environment. For one to expect anything else
from them is just not reasonable.
Regards to all,
Jeff Johnson
No one is questioning the economic environment. The everyday Joe did not create it but we are being ask to suffer and pay for it.
The problem I have with this is being mislead by Jeff and Keith.
At the last Shareholders Meeting in Grand Rapids Michigan I personally ask the question about the debt/equity ratio and was assured by Keith it is acceptable for a company such as GE.
Today it appears to be a noose that is strangling the life out of every long-term shareholder.
I think the BOD’s, including top Management should look in the mirror and ask this question:
Have I really been vigilant with the responsibilities granted me as a Director or Manager of GE ?
If the answer is NO you should resign immediately and take No Severance or other Golden Parachute benefits.
I would think the cutting of dividends should be in the same percentage and the cuts to the managment pay and the elimination of managemnt bonuses
I am a holder of GE commmon stocks. I bought them many years ago and I have never sold any. unfortunately no stock broker ever hintted that the stock was greatly overpriced. I am 88 years old and I now hold the stock which has lost most of its value. It is discouraging to hear that GE even thinks of doing away with paying diviends since even now it is a very profitable company.Itis aso discouraging to read the stock quotes and see small pennies increases related to other profitable organizations whose prices have gone much higher in the recent three months.
What if any thing is GE doing to effect any appreciable stock price increase. Has Ge bought back any of its stock latel?
Thank you
As a shareholder depending upon the company’s dividends as a primary share of retirement income, I’d like to submit the following as considerations for future decisions regarding shareholder dividends:
1. Given the current enormous influx of dollars into our domestic economy:
a.) Current company debt should be viewed in the
context that these debts are to be paid with
cheaper U.S. dollars;
b.) The continued trend towards even cheaper
dollars is imminent under the present
administration and congress;
c.) The global economy is in essentially a similar
predicament – which should prevent any
disturbing imbalances in trade equities; and
d.) The same ideology that applies to a.), above,
should apply, as well, to considerations
regarding shareholder dividends. Reduction
in dividends are compounded by their reduction
in value – along with their impact upon buying
power.
2. Giving consideration to China’s underpinning of our national debt, we would be well advised to maintain as good a trade relationship with these ‘benefactors’, as possible.
hi chris do you enjoy being a mouthpiece for ge?